With the Fed engaging in financial repression (maybe that should be oppression, the only role of the Fed is to steal from savers…) there are many corporate bonds being issued at low yields, some of which are at lower yields than losses that we experience during crises for the ratings class. Should this not be a warning sign? Yes, it should.

The Fed is creating another bubble. Note the failure of the last bubble they engineered — the housing mortgage bubble. They are smart, oh so smart, but with little true knowledge of how the world works. We would be better of without the Fed. Please unemploy a bunch of Ph.D. economists who can create very clever models of the economy that bear no resemblance to the real economy. Please eliminate a bunch of pseudo-intellectuals who think they can control the economy.

Please eliminate a bunch of sorcerers apprentices who think they understand how to stimulate the world, and replace them with a bunch of humble people who know that they do not know, and maybe, a few that know that they can’t really stimulate, so give up.

The low interest rates that the Fed supports for high quality bonds indirectly attempts to overleverage the corporate sector in the same way that they overlevered the consumers through housing 2003-2007.

We would be a lot better off without as much government interference. We grew much faster when the government did not try to control the economy as a whole. Please point to successes in government macroeconomic management. You will find none.

Interest rates are too low now, and are building up a new bubble in corporate debt. Don’t worry in the short run, the corporate sector is strong. But what if this continues for a while? The one remaining sector of strength will be compromised.

Our policies in the US stink… it is only a matter of time before they hurt us badly, whether through higher taxes, inflation, or default.

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The Fed under both Greenspan and Bernanke kept rates too low for too long encouraging discouraging saving and promoting consumption and Mal-investment(neither of which creates long term jobs). We saw the effects of Greenspan’s carelessness which ended in a huge bubble. Bernanke is promoting excess again and we we will of course deal with the unwinding of this excess at some point. Unfortunately the Fe never sees the new crisis or acts to prevent it. One day in the future we will question the wisdom of too much faith and power in a small group of academics.

Instead of personalizing the problem as being Greenspan or Bernanke or Obama or Bush or whichever central planning idiot, I think we need to step back and look at the bigger picture.

Washington DC has a “corporate culture” problem. Every decision they make is about protecting their own fiefdoms within the bureaucracy, and how to divide society’s pie (so they can take more of it). There is zero thought given to growing the pie; indeed thousands of agencies tax and regulate the pie to be smaller.

More taxes, more rules, more regulations, more inspections, more surveillance, more reporting — more and more economic friction and administrative overhead.

When financial markets failed in 2007-8, the immediate knee-jerk response was that we don’t have enough agencies and bureaucrats.

The Dodd-Frank Act is 2,300 pages of gibberish. It is longer than Gramm-Leach-Bliley, Sarbanes-Oxley, Glass-Steagal and the Federal Reserve Act ***COMBINED***.

It postulates that the SEC, CFTC, OCC, Treasury, FinCen, Federal Reserve, FBI, Secret Service, DoJ/Attorney General (plus 50 states with Attorney Generals, banking and insurance commissions of their own) And we have industry self-regulation via FINRA …

Somehow the crooks in Washington looked at dozens and dozens of existing redundant state and federal agencies — and concluded we need even more.

Don’t fix any of the existing agencies. Don’t fix any of the existing procedures, like allowing regulatory staff to develop connections and then sell those connections to the industry they are supposed to regulate.

Nope, we need another agency, housed in a bigger building, with more bureaucrats.

And we need to throw more money at it, paid for with more debt on top of the monster debt we already cannot afford.

This stupidity has been going on for decades. I don’t want to excuse Bush or Obama (or any predecessor). I am not excusing the incompetence or lack of real world experience of Greenspan or Bernanke.

I am just saying they personify a much bigger problem.

More spending, more taxes, more bureaucrats, more agencies does not and will not fix a deeper structural problem.

The bureaucrats in Washington DC have very different priorities than the public believes.

We are very idealistic and naive — blindly trusting some rather slimy characters to take over more and more… We act surprised when it doesn’t work and leads to the opposite results we intended.

“Absolute power corrupts absolutely” was how the British explained it in the 1800s.

“That government which governs least, governs best” was how one of the founding fathers of the USA phrased it in the 1700s.

Yet at least once a century, we have to go through the same unnecessary pain and suffering:

A group of arrogant, elitist, self proclaimed know-it-alls somehow con society into believing that we will enter nirvana if and only if we transfer all power and authority over to them.

Each and every time this has been tried, the con artists have enriched themselves and bankrupted society. It happens again and again and again.

The current crop of con artists in Washington DC are really no different than the ones that wrecked GM, the ones that wrecked the British Empire, the ones that wrecked the Spanish Empire, the ones that wrecked the Russian Empire/Soviet Union, the ones that wrecked the Chinese dynasties, the ones that wrecked the Myan civilization, the ones that wrecked the Roman Empire … the list goes on and on and on.

America has no right to act surprised when it turns out that this time is no different.

The political class (Washington DC this time) is enriching themselves by making empty promises, and stupid voters are buying into false hope.

I predict the con artists in Washington will rob Americans of everything they worked for, and Americans will vote for more of it. And we will blame the rich or the Jews or the Algerians or the Serbs or the barbarians of Gaul. Maybe we haven’t sacrificed enough virgins to the angry gods?

Or how about terrorists? Yeah, that’s the problem. We need to create a giant super bureaucracy to sacrifice more virgins to Mars, the god of war, so he will deliver us from terrorism!

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David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.

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Disclaimer: David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves.
Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.
Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions.
Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.